Should I Pay Off My Mortgage?
In these financial uncertain times I get a lot of questions from my clients on, “should I pay off my mortgage?”
Two years ago if you spoke to any financial advisor, they were literally fall off the chair or throw you out of the office if you ever mentioned paying off your mortgage early. And that’s not all you would get some explanation on stocks and how there is this never ending ability to increase in value indefinitely over time.
Two years ago investing your money would bring you a higher return than paying off mortgage debt. But what most people won’t tell you, and neither will your financial advisor, that investing your money in the stock market carries risk.
And if you want a firsthand experience, just tear open your retirement savings statement. In the last year alone your 401(k) has lost 40% of it’s value. And i am sure your advisor is now warning you that you should get ready for an upsurge in the stock market. Any kind of investment carries risk.
Paying off your mortgage is truly getting rid of debt. There is no risk associated with paying off debt. So if you borrowed it hundred thousand dollars, and physically pay off the hundred thousand dollars, that hundred thousand dollar debt can never come back. It does matter whether the stock market goes up or fall or inflation goes up or the dollar loses its value, the $100,000 debt is fully repaid.
Paying off your mortgage debt is one sure thing in life. In retirement you don’t have to use your retirement savings to use on mortgage debt.
There is one valid argument against paying off your mortgage. And that is if you don’t save any money at all you won’t have a cent for retirement. This argument is a pretty strange one. I’m not for one second recommending that you should not invest money in a 401(k) or retirement savings account. You should always contribute to a retirement savings account especially up to your employer match.
But what am saying is that if you are risk averse and you want to have a diversified financial portfolio, you should always consider paying off your mortgage in addition as investing your money. Putting every single penny you have into the stock market is not the best advice. If any financial advisor recommends that you should only be investing and money in the stock market you should run in the opposite direction.
And all current financial crisis reflects that poor decision and it is certainly not your fault. The media, your broker and your advisor have told you to make this unsound decision.
If you had made a decision to pay off your mortgage early there are many ways to accomplish this goal.
One method is to use the accelerated biweekly mortgage payment system. This requires that you pay your mortgage every two weeks which ends with you making an additional principal payment towards your mortgage payment once a year.
The second technique is to make additional mortgage principal payments when you have the cash at the end of every month. You must designate the money be applied towards principal otherwise the bank will keep up this and put a portion of this towards interest.
A third and more popular method is use the mortgage speeding up method. You can use the heloc as a mortgage checking account to pay off your mortgage faster. With the mortgage speeding up method you can slash almost 13 years off your mortgage and save thousands of dollars in interest.
The decision to pay off your mortgage or not is a personal decision. If you would like to have a diversified investment portfolio and the thought of not spending thousands from your paycheck to pay mortgage interest every month appeals to you, then paying off your mortgage is a risk-free financial different.
And in these financial uncertain times you need immediate answers and questions such as “should I pay off my mortgage?” should be easily answered…